Warren Buffett: US economy is already in recession

Warren Buffett told CNBC today that that by a "common sense definition", the U.S. economy is already in a recession, even if it hasn't met the technical definition of two consecutive quarters of negative growth.

He's been saying for several months that the U.S. could easily fall into a recession. He restated, however, his view that over the long-run the U.S. economy will do fine and that each generation will live better than the one before it. Buffett also said current conditions are "nothing like" the downturn of 1973 and 1974, although he can't rule out the possibility that things will get worse. Buffett noted that Federal Reserve Chairman Ben Bernanke has a tough "balancing act" and risks reigniting inflation with a series of rate cuts by the central bank.

Buffett also told CNBC's Becky Quick that while stocks are "not cheap" now, they're not extreme, either. He says he's waiting for when stocks become "very cheap." He does, however, "find more things to look at now than I did six months or a year ago." The best opportunities he sees right now are in bonds rather than stocks.

Buffett says his offer to guarantee $800 billion dollars in municipal bonds now backed by Ambac Financial Group Inc and FGIC is "not on the table" any longer. "We tossed our hat into the ring, and they tossed it right back."

The big bond insurers soundly rejected the offer Buffett made first made public last month on Squawk Box, saying their prospects would be severly damaged if Buffett took over the relatively solid muni bond guarantees, while not also backing the other very risky investments that threaten the bond insurers' financial footing. Berkshire created its own bond insurance subsidiary late last year.

In his letter to Berkshire shareholders on Friday, Buffett said he had identified four people who could take over making Berkshire's investment decisions, should he reluctantly give up that role.

Today he told Becky that none of those candidates are female, in part because not many women expressed interest in the job. Buffett's current role will be broken apart when he leaves Berkshire. The company had already identified candidates for Buffett's CEO role.to

My Take: Mr Buffett's views are too important to ignore or taken lightly. A very good example was last year when he disposes all his investment in PetroChina, many sceptics were saying he probably missed the China hot air balloon. It is true that he missed the last leg up in the HKSE but looking back now, he has made a correct decision and a handsome profit.